Ask Colin

Which charts would give the general trend of the overall market and individual shares for medium-term trading?

For a medium to long term trader, I would never recommend daily charts, except for tactical entry and exit from trades once a decision is made on the weekly chart. You might also use the daily chart to help clarify the weekly chart from time to time. However, beware the trap of investing for medium to long term and then tracking the positions daily.

There is no single "right" answer for what to use. I like to use peak and trough analysis on weekly charts for the sort of work you are doing. However, the next most useful tool is probably a moving average. I like to use a 260-day (52-week) moving average (MA). I use the direction of the MA. Thus, I like to see the MA turn up for a buy and turn down for a sell. However, I would act on an earlier signal from peaks and troughs or a breakout from an accumulation or distribution pattern (any trading range like a reversal pattern.

You will need to study lots of charts and find the MA that suits your time frame and risk tolerance.

I would use the same MA on both the stock and the market index. The way I run my strategy, I use the market index for market exposure strategy and the individual chart for trading decisions.

Using a moving average will not get you in at the bottom or out at the top. Nothing except luck will do that. However, it should get you 50 to 80% of the trend, depending on the circumstances.

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